PBN economic summit keynote: Recession not in the forecast

WARWICK – “There is no reason to suspect there will be a recession in the U.S. anytime soon,” said Thomas Tzitzouris, a Rhode Island native and a director for Strategas Research Partners in New York.

Tzitzouris was the keynote speaker for the Providence Business News’ Economic Trends Summit at the Crowne Plaza Providence-Warwick Thursday morning, and despite forecasting no recession on the horizon, his predictions for 2020 weren’t entirely rosy.

While Tzitzouris told the gathering of about 175 businesspeople who attended the summit that he believed the gross national product would grow about 2% in 2020, he said the year appears to have gotten off to a sluggish start.

The economy’s first-quarter performance, he said, will be dampened by Boeing Co., the lingering effects on business confidence despite the trade war truce with China, and concern about supply chains connected to China because of the coronavirus outbreak.

Tzitzouris said the spread of the coronavirus should begin to slow by March, although he said the possibility of the virus worsening, forcing China to enact even more stringent quarantine measures, is a “wild card” in trying to determine the economic future.

But assuming the outbreak slows and the preliminary trade agreement with China bears fruit, Tzitzouris said pent-up demand should fire up the economy toward the end of the year. And he sees the possibility of serious expansion in housing by the third quarter of 2020.

But the stock market, he said, will not rise much higher, and he forecasts the possibility of what he calls a “down leg” at some point during the year. “Everything is rich right now,” he said.

But Tzitzouris believes the Federal Reserve will keep interest rates low to avert a recession. “Economies don’t die of old age; they get murdered. And usually the killer is the Fed,” he said.

As for Rhode Island, he said, the state will continue to enjoy the benefits of the national economy, although it is unlikely to outpace either its neighboring states or the country as a whole.

During a panel discussion, R.I. Commerce Secretary Stefan Pryor said the economic data for Rhode Island is strong right now, with an unemployment rate at 3.5% and the number of jobs in the state is at an all-time high at 506,300. Pryor acknowledged the Great Recession hit the state very hard, and the recovery continues.

“We’re coming from behind,” he said.

Pryor was joined on the panel by Luke Ebersold, Rhode Island managing partner for blumshapiro; Mark Gim, president and chief operating officer at The Washington Trust Co.; Thomas O. Sweeney, founder of Sweeney Real Estate & Appraisal; and Kristin Urbach, executive director of the North Kingstown Chamber of Commerce.

The panelists agreed that Rhode Island has been hurt by the high cost of doing business and a generally poor public education system that is not preparing workers for the next generation of jobs.

When Tzitzouris asked the panelists what they were worried about, especially concerns that might not be obvious, he got a variety of answers.

Ebersold was worried about the 2020 election results. Gim wondered when the enormous accumulated costs of federal budget deficits, entitlement spending and poorly funded municipal pension plans were going to come due. “The problems are so big, no one likes to think about them,” he said.

Pryor was not happy with federal regulatory decision-making, particularly in the offshore wind energy field. He said the state is counting on that part of the “blue economy” to be a major driver of future growth, and it’s hard to move forward without some guidance from the federal government.

Sweeney voiced his concern about the upcoming Census and its potential impact on the state, particularly if Rhode Island should lose one of its two congressional seats.

Andy Smith is a PBN contributing writer.